This month marks the one-year anniversary of the EMV (Europay, MasterCard and Visa) liability shift, which transferred the responsibility for fraudulent credit/debit card transactions from card companies to merchants that do not use EMV chip-enabled terminals.
There have certainly been happier anniversaries. This 12-month span has been marked by confusion and frustration. The rollout of chip-and-pin cards was not simultaneous, leaving many consumers without the right cards. Even with chip-and-pin cards, however, the payment experience has become convoluted. Attempts to insert the card into an EMV terminal slot are often stymied, and you end up having to swipe the card like before.
The authentication process also seems to take noticeably longer. In fact, if a consumer uses their credit card four times a day, they will spend five-and-a-half hours per year waiting for EMV transactions to go through.
Needless to say, the transition has not gone smoothly. This is not unexpected, as the U.S. is the largest card market to migrate to EMV technology. At the heart of this conflict are retailers, many of which have yet to upgrade despite the shift being announced five years ago in 2011. In fact, it is estimated that it will take until the end of 2017 before 90 percent of retailers are EMV ready.
Retailers can’t take all the blame, however. A recent survey found that among retailers that had upgraded their systems, most have been waiting for more than six months to achieve certification from credit card companies. The entire process is time-consuming: The National Retail Federation reports the average retailer takes 19 months to get EMV fully operational in their organization.
This, combined with the costs of upgrading (average costs for EMV-compliant card terminals are $200-$500, which adds up quickly for large retailers), has left many retailers dragging their feet. It seems at least in the short term, many of them are willing to bear the brunt of fraudulent transactions than pull the trigger on this expenditure.
Many practitioners in the mobile industry are eager for retailers to fully embrace EMV, as it will significantly expand the number of terminals where contactless and Near Field Communication (NFC) mobile payments can be processed, in addition to chip-and-pin cards. Experts expect it to lay the groundwork for a payments revolution that will see more consumers in the U.S. pay with their smartphones than cards or cash by 2020. These will largely be processed using mobile wallets like Apple Wallet, Android Pay and Samsung Pay, which increasingly are coming pre-installed on smartphones and smartwatches.
Over the past few years, we have seen a number of market forces driving the mobile wallet evolution. These include robust investments from Apple and Google, rapid consumer adoption of non-payment mobile wallet features like boarding passes and the runaway success of the Starbucks’ mobile wallet within its app. But there has been a missing link ” the limitations to scan smartphones at the cash register. If stores don’t have the technology to accept mobile payments, mobile wallets can never truly “take off.”
At the onset of mobile wallets, they faced a chicken-and-egg problem. Retailers had little incentive to upgrade their POS systems to accept mobile payments because there were few phones with NFC chips installed. Smartphone makers, fully aware of the small footprint of NFC-supported systems, failed to see a reason to make space for the chip in their devices.
Now that NFC chips are a staple in smartphones and the EMV transition has incentivized retailers to toe the line, mobile wallets are well on their way to becoming powerful commerce platforms. Apple and Google have bolstered their mobile wallets and now both apps are capable of processing payment and loyalty information simultaneously. Adding offers to that mix is on the horizon.
Smart retail CIOs see where the puck is going and are upgrading to POS terminals that can support contactless loyalty transfer, in addition to mobile payments. Verifone and Ingenico are a few POS providers that meet these criteria. In cases where terminal upgrades have already been made, the provider should be able to add this functionality via an over-the-air software update.
Selecting a system with these capabilities offers other advantages beyond reducing fraud liability and delivering a better payment experience. At Vibes, we help loyalty teams and marketers at large retailers leverage mobile wallet for marketing purposes. By mobilizing their loyalty programs and offers in Apple Wallet and Android Pay, retailers can not only allow shoppers to get rid of plastic loyalty cards and print coupons, but also achieve business outcomes, such as driving in-store foot traffic, increasing basket size and improving loyalty.
Apple and Google have both indicated that the ultimate vision for checkout is a single tap that integrates the trifecta of payment, loyalty and offer data into one seamless experience. This vision is rapidly approaching reality, and retailers that orient the next generation of their POS infrastructure around mobile wallets will realize an even greater return on their investments.
Ken Kunz is the VP of Technology at Vibes, a mobile marketing leader. Ken leads all aspects of Vibes’ technology organization, including engineering, infrastructure, product and user experience.